India to hold second DSF round this week

The Indian government has said it intends to open its second auction of discovered small fields (DSF) on August 9.

Upstream regulator the Directorate General of Hydrocarbons (DGH), which operates under the Ministry of Petroleum and Natural Gas, said last week that 60 fields were being offered in DSF-II. The round was originally supposed to be opened in June.

DGH said DSF-II’s main features included single licensing for conventional and unconventional hydrocarbons, allowing bidder pre-qualification even with zero prior technical experience, no upfront signing bonus and full pricing and marketing freedom.

“Royalty rates are further reduced compared to DSF-I,” DGH added without offering details.

In 2016, New Delhi moved to offer small fields that had been sidelined by state-run Oil and Natural Gas Corp. (ONGC) and Oil India Ltd (OIL) under more open bidding rules that included marketing and pricing freedom as well as lower taxes.

Under DSF-II, the government is offering 22 fields that had belonged to ONGC, another five that OIL had owned as well as 12 that are relinquished New Exploration and Licensing Policy (NELP) blocks. Another 21 fields that were offered during the first bid round in May 2016 will also be up for auction.

To date, the oil ministry has held two auctions under new rules – DSF-I and the Open Acreage Licensing Programme (OALP-I) under Hydrocarbon Exploration and Licensing Policy (HELP).

Though India is working to reduce upstream red tape, overseas investors remain wary of the country because of wider investment issues.

These include a challenging taxation system, difficulties in repatriating profits as well as sluggish dispute resolution mechanisms. With India heading towards general elections in 2019, investors may prefer to adopt a “wait and see” approach until 2020, when the new government’s policies will be more apparent.